BBC NEWS | Business | Israel releases Palestinian funds
Israel has agreed to pay the Palestinian Authority (PA) some of the back taxes it is owed.

The Israeli freeze on payment of these tax revenues has further crippled the PA at a time when the curfew and the long-running closure of Israel to Palestinians from the occupied territories has left their economy in ruins.

The move seems to be a conciliatory gesture following worldwide criticism of an air strike which on Monday killed not only a Palestinian militant but more than a dozen other people.

Up until now, Prime Minister Ariel Sharon's cabinet had charged the PA with using the money to pay for terrorism, and refused to hand over any of the money until monitoring systems - preferably US-led - were in place.

But on Wednesday Foreign Minister Shimon Peres told Israeli Army radio that about 10% of the $430m (£273m) it owes will be released.

At the same time, the $31m or so that the PA owes to power and water utilities will be written off.

And Mr Peres also said he and the PA had agreed to let 7,000 Palestinian workers return to their former jobs in Israel, with 4,000 permits already issued - although he did not say whether any had yet been allowed back in.

The decision, according to Israeli daily Haaretz, came under heavy pressure from the US.

The first $14m is going to be released on Monday, with another two tranches on dates to be confirmed.

But the Israeli government is not prepared to commit to when - or whether - it will unblock further funds.

"We decided to trust the Palestinians, in particular Finance Minister Salam Fayad, by releasing a first disbursement," one Israeli official told Reuters.

"Initially we had planned to await the arrival of a representative of the US treasury who was to help establish an international control mechanism for the Palestinian Authority's accounts, but he still hasn't arrived and we decided to go ahead anyway."
http://news.bbc.co.uk/2/hi/business/2151763.stm